Market Matters

Stimulus talks dominated the market move this week, as both sides appear to want to get a stimulus done before the election. This has sent bond yields higher, specifically the 10-year as it is now above 0.80%. Momentum is carrying the 10-year yields higher, although the technicals are showing that we are getting to be a bit oversold. Looking to next week, we are getting close to the election so traders will be getting positioned for the election results if they haven’t already. The second round of stimulus is still not agreed upon so the markets will be watching to see what progress is made. Of course, the path of the virus is always a concern. It is unclear what reaction the market will have if we see a spike in cases as it is assumed that there will not be a second lockdown; however, we would expect a strong market response if there is progress made towards a vaccine.

 

Initial Jobless Claims

Initial Jobless Claims for the week ending October 17th fell to 787k, which is down -55k from the previous week’s revised level of 842k (orig. 898k). The last time the weekly claims data was lower was back on March 14th at 282k. Continuing claims, which lag by a week, also saw a significant decline for the October 10th week by -1.024mln to 8.373mln. We also saw a downward revision to the prior week as well, down another -621k to 9.397mln vs. the originally reported 10.018mln. This now means that continued claims have fallen by more than 1mln per week over the past 3 weeks.

 

Existing Home Sales

Existing Home Sales for September rose by +9.5% to a seasonally adjusted rate of 6.54mln units. Looking YoY, existing home sales are now up +20.9%. Within the September data, the inventory of homes for sale fell -19.2% annually to just 1.47mln at the end of the month. At the current sales pace, that represents only a 2.7-monthly supply. That is now the lowest since the tracking of the data back in 1982. As we know, with supply tighter, prices have continued to rise. The median price sold in September was $311,800, which is a +14.8% gain vs. a year ago. This is also an all-time high dating back to 1968. Regionally, sales in the Northeast rose +16.2% at an annual rate of 860k and a +22.9% increase from a year ago. The median price in the Northeast was $354, 600, which is up +17.8% YoY. In the Midwest, sales rose +7.1% to an annual rate of 1.51mln and up +19.8% from a year ago. The median price in the Midwest was $243,100, which is a +14.8% increase YoY. Sales in the South increased by +8.5% to an annual rate of 2.8mln and up +22.3% from the same time a year ago. The median price in the South was $266,900, which is a +13% increase YoY. Finally, sales in the West rose by +9.6% to an annual rate of 1.37mln in September, an +18.1% increase from a year ago. The media price in the West was $470,800, up +17.1% from September 2019.

 

Building Permits

Building Permits for September rose by +5.2% to 1.553mln, as housing starts only rose by +1.9% to 1.415mln. Expectations for today’s prints were permits at 1.52mln and starts at 1.457mln. Single-family starts rose +7.8% to 1.119mln annualized, while multi-family starts increased only +4k to 390k. Broken out by region, permits were up +25.8% in the Northeast, up +9.6% in the Midwest, the West up +3.2%, with the South up +2.0%. On the starts side, single-family starts increased by +8.5% to 1.108mln annualized, with multi-family starts down -14.7% to 295k. The single-family starts print was the highest since June 2007, while starts in multi-family sectors were the lowest since August 2017. By region, starts were up +66.7% in the Northeast, the South up +6.2%, up +1.4% in the West, and declined by -32.7% in the Midwest. Looking at the number of units under construction we see 1-unit structures up to 539k from a prior 525k, which is now the highest in roughly 19 months. YoY, that sector is up +3.5%. Finally, looking at the pace of completions, we see an increase of +15.3% to 1.413mln, now the highest result since August 2007. Within that result, completions in the multi-family sectors jumped by +52.4% to 480k, while single-family completions rose a mere +2.1% to 921k.

 

NAHB Housing Market Index

The National Association of Home Builders’ Housing Market Index rose to 85 in October, setting yet another record high after last month’s print of 78. Looking YoY, the index is up from 71 back in October 2019. Within the index, the current sales conditions rose +2 points to 90, sales expectations in the next 6 months increased by +3 points to 88, and buyer traffic remained unchanged at 74. Two regions saw +7 point gains this month, with the Northeast jumping to 88, and the West to a strong print of 95. However, the other two regions actually saw slight declines, with the Midwest down -1 to 77 and the South down -2 to 83. All remained well up over a year ago, when the Northeast was at 60, the West was at 83, the Midwest was at 57, and the South at 76. “Traffic remains high and record-low interest rates are keeping demand strong as the concept of ‘home’ has taken on renewed importance for work, study and other purposes in the Covid era,” said NAHB Chairman Chuck Fowke, a builder from Tampa, Florida. “However, it is becoming increasingly challenging to build affordable homes as shortages of lots, labor, lumber and other key building materials are lengthening construction times.” Although confidence remains at a very high level, builders are struggling to ramp up production, and while housing starts and building permits are rising slowly, they are not even close to meeting demand. “The housing market continues to be a bright spot for the economy, supported by increased buyer interest in the suburbs, exurbs and small towns,” said NAHB chief economist Robert Dietz. “New single-family home sales are outpacing starts by a historic margin. Bridging this gap will require either a gain in construction volume or reductions in available inventory, which is already at a historic low in terms of month’s supply.”